Currently, several financial management systems are available to help an individual user, or an authorized party acting on behalf of an individual user, obtain the user's financial data, process/analyze the user's financial data, and generate various reports for the user.
Financial management systems typically help users manage their finances by providing a centralized interface with banks, credit card companies, and other various financial institutions, for electronically identifying and categorizing user financial transactions based on electronic data representing the financial transactions. Currently, financial management systems typically obtain the electronic transaction based information, such as payee, payment amount, date, etc. via communication with banks, credit card providers, or other financial institutions, using electronic data transfer systems such as the Open Financial Exchange (OFX) specification, or various other systems for transferring financial transaction data.
Typically a financial management system's ability to identify and categorize specific financial transactions is what allows the financial management system to provide the features that are of interest to the user. Typically, the ability to categorize specific financial transactions is, in turn, dependent on an ability of the financial management system to obtain the electronic financial transaction data necessary to identify and categorize specific financial transactions.
For this reason, currently available methods and systems of automatic categorization of financial transactions based on payee name are only applicable to electronic transactions, or financial transactions that are represented by electronic financial transaction data. However, while many financial transactions involving individual consumers do generate electronic financial transaction data, many other financial transactions still rely on the use of paper checks. Currently, these check-based transactions are largely excluded from the automatic categorization process. Therefore, currently, the data related to a check-based financial transaction, such as payee, payment amount, date, etc., must be manually entered into financial management systems.
In addition, the payee associated with a given financial transaction is not always discernible from financial transaction data, and some payee names can be misleading so that a categorization of the check-based financial transaction cannot be accurately determined even after the financial transaction data has been obtained. For example, a payee name associated with a check-based financial transaction may be absent altogether, unreadable, coded, or represent the name of a parent company that indicates nothing about the actual merchant or products that are the subject of the financial transaction.
In addition, some payee names are misleading and can easily confuse an automatic, or even a manual, categorization system. For example, a fast food restaurant having a 50's drive through theme may be named “The Auto Shop” or “Pit Stop.” In this case, a currently available automatic categorization system, or even a user manually entering the financial transaction data, is likely to categorize the financial transaction as an automotive expense based on the payee name, as opposed to the proper categorization as a food/dining expense.
Unfortunately, in most cases, the correction of an incorrect categorization of a given financial transaction takes more user time, and more user manual entry, to fix than it would have taken to manually enter the correct categorization of financial transaction in the first place.
As a result of the current situation, and limitations of current automatic categorization systems, check-based financial transactions are currently largely excluded from methods of automatic categorization of financial transactions, and/or any attempts to automatically categorize check-based financial transactions are often inaccurate and fail to correctly and reliably categorize the check-based financial transactions.
As a result, using current financial management systems, the user is often forced to perform significant manual data entry. This is particularly problematic given that experience has shown that an average user is far more likely to adopt, and continue to use, any financial management system if the amount of manual data entry, i.e., data entry made via any user interface device, such as a keyboard, a mouse, a touch pad, or any other device that requires input from the user, is minimized In addition, anytime manual data entry is required there is an opportunity for error introduction.
What is needed is a method and system that allows a financial management system to automatically, and reliably, categorize check-based financial transactions.